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Monday, October 17, 2011

GOP & Dems Continue Debate Over Solyndra Loan Guarantee

Oct 14: The House Energy and Commerce Committee, Subcommittee on Oversight and Investigations, Chaired by Representative Cliff Stearns (R-FL) held a hearing on "Continuing Developments Regarding the Solyndra Loan Guarantee." [See WIMS 9/14/11]. Despite requests from Democrats for representation from the Department of Energy, the Subcommittee only heard testimony from two witnesses from the Department of Treasury.

The Treasury Department testified about that Agency's belief that DOE violated the 2005 Energy Policy Act when restructuring the loan to the now-bankrupt Solyndra of a $535 million taxpayer guaranteed loan and, in the restructuring, placed taxpayers at the back of the line so that private investors would be the first to recoup losses on the company. Republican Members indicated that Treasury officials agreed to testify after the White House last Friday (October 7) "unloaded a significant new document production, including alarming emails from Treasury and OMB personnel expressing frustration that DOE had failed to communicate with them regarding the Solyndra loan guarantee or consult with the Department of Justice, as Treasury had advised. Moreover, the Treasury and OMB officials' emails clearly indicate they believe DOE's legal justification for placing taxpayers at the back of the line was inconsistent with their interpretation of the law."

Republican Members cite a December 15, 2010 email, from senior officials at OMB questioning the legality of DOE's restructuring, writing: "There are some questions at the staff level about how DOE is going about the restructuring for Solyndra. At least one involves the legal question of what 1703(d) (3) means for their plan to make some of the debt 'junior' to the new debt. I think they have stretched this definition beyond its limits." The Members indicate that the emails refer to a legal analysis prepared by DOE to justify its decision to place private investors ahead of taxpayers in the event of Solyndra's bankruptcy, despite a clear prohibition of such 'subordination' of the taxpayers' obligation in the law.

A Senior Treasury lawyer offered additional commentary on DOE's actions, writing in an August 16, 2011, email: "I would bet a quarter that the DOE lawyers have some kind of theory on how whatever restructuring they have done and whatever they are considering doing does not violate these requirements. Cant wait to hear it." Chairman Cliff Stearns said after the hearing, "I have never seen anything like this in all my years in Congress -- here we have one cabinet level agency concerned that another has broken the law, and taxpayers are on the hook for half a billion dollars as a result."

Full Committee Chairman Fred Upton (R-MI) said in part, "What we have seen so far suggests that DOE essentially ignored Treasury after signing off on the $535 million loan guarantee. The documents also reveal a Department of Energy fervently steering more taxpayer cash to Solyndra with complete disregard to the alarm bells coming from Treasury and others within the Obama administration. DOE apparently stonewalled Treasury, failing or refusing to turn over information related to Solyndra's restructuring. . . The Department of Energy has a lot more explaining to do, and we will hear from them again soon. Unfortunately, we also have to ask: how many more Solyndras are there? Were other warning flags ignored, and risky gambles made with the taxpayers' hard-earned money?. . ."

Full Committee Ranking Member Henry Waxman, (D-CA) said in an opening statement, "The Committee has received a six-page document from the Department of Energy that explains the Department's legal rationale for subordination. We asked last week if the majority would object if we released this document so the public could understand DOE's rationale. The majority objected. They did not want the public to see DOE's explanation. On Wednesday, the Democratic staff asked the Republican staff if there would be an objection if we included a discussion of the DOE legal memorandum in the background memorandum we provide to Democratic members. Again, the Republicans objected. They asked us to withhold this critical information -- DOE's legal rationale for its actions -- from our own members. And yesterday, the Republicans said they don't believe this memo should be made public at this time. This investigation is beginning to resemble a kangaroo court. . . I don't object to an investigation into Solyndra. Based on the record to date, I don't see evidence of wrongful conduct by government officials, just a bad investment decision. . ."

According to the DOE legal analysis as contained in the memos referred to by Rep. Waxman, "On the current facts, the Loan Programs Office has determined that the proposed restructuring offers the best prospect of eventual repayment in full of the Borrower's obligations under the Loan Guarantee Agreement, and is demonstrably preferable to a liquidation of the Borrower. In light of that determination, we conclude that the proposed subordination of the Borrower's obligations to DOE is consistent with both the text and the purposes of Title XVII. . ."

Access a release from Committee Republicans with links to the email, the Solyndra Restructuring Legal Memo and the second version Solyndra Restructuring Legal Memo (click here). Access the Republican website for the hearing with background documents, opening statements, witness testimony and a webcast (click here). Access the Democratic website for the hearing with links to opening statements and the DOE Memos (click here). [#Energy/Solar]